Reflections from Cargotec IR roadshow in Asia - US equities considered “safe investments” by some Asian investors

The generation born after the Second World War, i.e. baby boomers, are retiring in Europe, which has led to changes in pension insurance companies’ asset allocations. In Asia, assets under management are growing fast, and therefore Cargotec, among many other Western companies, has been roadshowing in Hong Kong, Tokyo and Singapore to meet local investors and potentially get new owners. Role of family offices and sovereign wealth funds is large. 

Surprisingly, most recent investments are still being allocated to US instead of Europe, and local investors have overweight in USA. Investors believe that Donald Trump is taking whatever action needed to protect USA, and therefore it is considered to be more safe to invest in USA than in Europe. Even though the valuations in Europe are clearly lower than in the USA, political risks in Europe are considered to be high, especially in large countries. UK is vulnerable due to Brexit, Italy has funding challenges, Germany is a major exporter and therefore exposed on tariffs. In addition to that, Turkey has far too many challenges.

Corporate governance for Asian investors is important because of several reasons. Composition of management team and Board of Directors is one of the key issues. High turnover in management team is considered risky, and consistency is important. Incentive structure and reasons for the changes in the incentives are important for the investors. Regarding Board members, potential conflicts of interests and tenure are studied carefully. There are also practical and experience-based reasons, based on the wrongdoings in some Asian companies. It is not exceptional that Asian company publishes a release that CEO or some other management team member has just disappeared. Some investors for example in Australia have decided that they will not invest in Asian companies at all. Therefore Western companies, which have strong positions in growing Asian markets, and Western corporate governance standards can be attractive for quite many investors.

Asian investors need some kind of local angle for the investor presentation. Popular consumer and luxury brands can be interesting investment opportunities especially for family offices. Some global wealth managers focus on individuals with assets under management exceeding fifty million euros, a segment which could be pretty limited in Finland. Business exposure, local customers and local production can also be interesting perspectives.

Based on my personal experience, investors in Asia are keen to meet European and Finnish companies, which are typically well known for high corporate governance standards and have strong positions in the growing Asian markets.

Hanna-Maria Heikkinen
Vice President, Investor Relations, Cargotec